Strictly Sales: Five things to consider when developing producers

"Strictly Sales" is written by the faculty of the Dynamics of Selling program. This month's coumn is from Jeff Wodicka, CIC.

MANY books and seminars are available to help agency managers hire fresh, untrained producers. The real management challenge begins after the hire. What do you plan to do with your new recruit on the first day, in the first week and during the first month? Well over 30% of new producers fail to last 12 months in the job. This is partly because of poor hiring practices, but the problem is compounded by having insufficient or poor training.

As a sales manager for the last 20 years and, more recently, in directing the National Alliance Producer Schools, I have studied the post-hire best practices of both independent agencies and direct writers. Working with a cross-section of new producers has led me to a number of conclusions regarding producer success and retention. Consider the following five ideas for developing profitable producers.

Someone must manage new producers

Large agencies can afford a sales manager dedicated exclusively to mentoring and feeding the production team. New producers will not succeed without a mentor guiding them until they can operate independently. In small and midsize agency operations, a primary producer or principal usually acts as a part-time sales manager. Since new producers have different backgrounds, skills and potential, the acting sales manager must adjust his or her time to the specific requirements of each new trainee.

Not all producers are like you

A common mistake many managers make is assuming that newly hired producers can "hit the ground running." Only 2% to 3% of all producers are natural-born "super producers" who will rise to the occasion regardless of how much support they receive. If you mentor and motivate an average producer, you get an above-average producer who adds to the bottom line. If you ignore an average producer, he or she will stagnate and drag the team down with a below-average performance.

Average producers and even some above-average producers share a number of traits, such as a fear of failure and a fear of looking foolish. Some thrive on risk and will dive into the deep end of the pool without worrying about how well they can swim. Most, however, won't jump in-or call on a new account-until they feel confident they won't fail or look foolish. A good sales manager learns the specific needs of every producer and provides the proper coaching and training to each one.

The return isn't overnight

Two questions surface at almost every insurance sales management seminar: What commission should we pay, and how long should it take a producer to validate? The answer to the first question is simple: "It depends." It depends on what a producer is selling, how much money goes to agency support, the agency's profit-level goals, whether the agency is focused on new production or retention and what the going commission rate is in an area.

The second answer depends on agency-specific information: What is validation? How much are you paying the producer (salary plus benefits)? What do you expect the producer to sell (personal lines, Main Street business, commercial lines, a combination)? What percentage of agency commission is allocated as producer compensation? When does the agency start "keeping score?"

Validation occurs when a producer has built a book of business sufficient to switch from a salary to strictly commission-based compensation. A producer who starts at a salary of $40,000 and receives 40% of the commission he or she brings into the agency must bring in $100,000 in agency commission to maintain his or her compensation level under a commission-only plan. At an average agency commission of 12%, this means a producer must bring in $833,333 of premium. Figuring an average of $5,000 premium per account, the producer needs 167 new accounts. Thus it would take approximately seven new accounts per month to validate within two years. Clearly, new producers take time to shift from the "expense" column to the "profit" column in an agency's books. The "safety net" for the agency during this time is its ownership of the business the producer brings in.

Niche marketing increases success

Most new producers spend a great deal of time working on accounts that have little likelihood of success. Calls from "price shopper" prospects often are given to the new kid on the block. This may be great practice for new producers, but underwriting rejections and abysmal close ratios can sap a new producer's motivation. In addition, the new producer repeatedly may have to interrupt more experienced staff members with questions.

Assigning a new producer to a specific niche improves training, reduces the drain on other producers' time and provides new producers with confidence gained by better sales success. At the National Alliance Producer School, we require both agency principals and new producers to establish a unique niche, such as a specific SIC code like "restaurants" or a broad grouping such as "EPLI coverage." This might be wrapped around a special program the agency has established. A niche also might be assigned to a producer based on his or her prior experience with it.

Training is a total agency commitment

Training is successful only if the entire agency and key carrier friends are willing to spend the required time on it. It must be properly and logically scheduled, with subjects, dates, times and mentor responsibility assigned. Once assigned, training must take place without excuses.

New producers need at least six months of training before they become "field" productive. Consider investing in producer education programs. They may seem costly, but the foundation they provide can't be obtained within the agency. Give your producer six months of "real world" experience, then look for a program designed for producers at that experience level. Build your new employees' initial training "backward" from the start of such a program.

The first month is for orientation. Allow producers to sit for weeks at a time in various agency positions, and arrange a one-week internship with your lead carrier. Your agency can use online programs to expose new producers to entry-level coverage concepts, without tying down staff in one-on-one training. A senior staff member can mentor a section of the online training and be available to answer questions. During the second or third month, build licensing school into the training schedule. It is also extremely important to begin sales training early.

Building successful producers requires continued training for both producers and sales managers. Agencies must be willing to establish a sales culture from top to bottom. Success takes work, but the rewards for both producers and agencies are boundless.